Growth in IT contractor demand falling in February at its fastest rate since covid triggers warning to Jeremy Hunt

Nervous organisations kept “playing the short game” by focusing on temporary hires in February 2023 – but that focus was nearly lost in IT.

Rather than their hirers strongly follow the trend of taking on temps over permies because the economy is shaky, IT contractors last month saw their prospects fall flat.

Standing at 50.6, the REC’s February IT contractor index pointed just 0.6 of an index point away from ‘the red,’ representing its lowest reading since November 2020.

Down more than four index points from a month ago, the index score also represents the biggest monthly reduction in growth in demand for IT contractors since covid (April 2020).

'Hesitancy from candidates to move roles'

Recruiters belonging to the Recruitment & Employment Confederation (REC) acknowledged a ‘hesitancy from candidates to move roles’ due to the economic outlook.

Hirers wanting to avoid low response levels may have simply not gone to market as a result; they may have over-recruited in January (55.0); or they may be worried about rates.

Regarding cash, February saw “increases in starting pay” specifically because of “difficulties attracting and securing” the right candidate, says the REC’s deputy CEO Kate Shoesmith.

'Spring Budget 2023 is the ideal opportunity'

And while on the one hand they “try to compete with the rising cost of living”, on the other, engagers are having to assess “what variable economic forecasts might mean” for them.

“Many businesses are doing what they can,” continued a sympathetic-sounding Ms Shoesmith, “but the Spring Budget is the ideal opportunity to find a way forward”.

She appealed: “The chancellor must put people-issues first, with innovative and refreshed policies on skills and tackling economic inactivity, and from immigration to childcare.”

Following publication of Report on Jobs which contains the IT contractor index, the REC’s boss said the “rate that staff shortages are getting worse is slowing.”

'Pay pressure'

However Neil Carberry then cautioned: “Shortages not getting worse [as] quickly doesn’t reduce the level of the shortage! What it might do though, is moderate pay pressure.”

Yet in IT, the list of “in short supply” skills hasn’t drastically changed since January, indicating any moderation in pay pressure troubling end-users will be even more slight.

According to the report, IT contractor shortages in February covered Automation Testing, Cyber; Cyber Security, Data Engineering, Development, IT/Technology and Software.

'Hiring conditions don't seem likely to get much easier'

Shortages of Data Engineers, Developers and applicants skilled in Software and IT/Technology hit the permanent market too.

But unique to full-time vacancies, REC member firms struggled to fill positions requiring Data Science, Digital, Media, SAP and Software Engineering.

Jack Kennedy, UK & Ireland economist at Indeed.com said last week: “While the labour market is likely to soften further as the year progresses, hiring conditions don’t seem likely to get much easier any time soon and many employers continue to grapple with staffing gaps,”

“A focus on attraction and retention is prompting many to review their offering[s]…in a bid to gain a competitive advantage.”

'Time-to-hire, flexibility, agility'

Michelle Mellor, managing director of Cummins Mellor Recruitment echoed in a LinkedIn post: “Every client I’m working with currently is now all about supporting and consulting on their workforce plan, talent attraction, retention strategies [and] time to hire rates”.

The post continued: “Experience is what companies are now competing on. As well as flexibility, agility, a hyper-personalised plan…it’s about really looking to our workforce first and foremost as a whole human being, and secondly at the job”.

At the REC, Mr Carberry just hopes Jeremy Hunt will look at the workforce realistically on Wednesday.

“[Our] message [to the chancellor] is clear -- this tight labour market isn't going away. Public policy needs to react -- there is a lot that can be done to help at Budget 2023…to help on activation, childcare, skills and regulation.”